Nov-05-2009SEC Likely to Charge More People in Galleon Case
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CONTENTS:SOURCESFIND OUT MORE ON THIS SUBJECTNEW YORK (Reuters) - More defendants may be added to the insider-trading case involving the hedge fund firm Galleon Group, a lawyer for the U.S. Securities and Exchange Commission said on Wednesday. The lawyer, Valerie Ann Szczepanik, made the comments during the first hearing in Manhattan federal court since the SEC filed civil charges on October 16 against Galleon founder Raj Rajaratnam and five others, some of them executives of well-known U.S. companies.
[1] NEW YORK, Nov 4 (Reuters) - There is "a real possibility" of additional defendants in the insider trading case against the Galleon hedge fund, its founder Raj Rajaratnam and others, a lawyer for the U.S. Securities and Exchange Commission said on Wednesday.
[2] NEW YORK, Nov 4 (Reuters) - Investigators of the hedge fund insider trading case against Galleon Group founder Raj Rajaratnam have more than one cooperating witness, U.S. prosecutors said in court papers on Wednesday.
[3] NEW YORK (Reuters) - Investigators expect more people to be charged in the Galleon hedge fund insider trading case, and they said they have cooperating witnesses to strengthen their case against the fund's billionaire founder, Raj Rajaratnam. In statements at a court hearing and in briefs on Wednesday in parallel federal civil and criminal cases, the government signaled publicly for the first time since Rajaratnam and five others were arrested on Oct. 16 that its net was widening.
[4] The government's case against Raj Rajaratnam, founder of hedge fund Galleon Group, on the charge of insider trading details alleges that the hedge fund manager's primary competitive advantage for investors was a web of connections close to or inside technology companies feeding him illegal tips on future directions of the companies' stock prices.
[5] The Galleon Group has converted nearly all of its hedge funds into cash, as the firm seeks return money to its investors in light of its founder's arrest on insider trading charges, according to a letter to investors obtained by DealBook. Shortly after its founder and chief, Raj Rajaratnam, was arrested last month, Galleon has sought to wind itself down.
[6] NEW YORK, Nov 4 (Reuters) - Galleon Group, the hedge fund firm at the center of a sweeping insider-trading scandal told investors in a letter on Wednesday that it has been contacted by several investment firms inquiring about its employees and that it plans to return capital in the coming months. Galleon founder and chief investment officer Raj Rajaratnam was one of six people arrested by U.S. authorities last month on charges that they participated in a scheme to share and make trades on inside information. Within days, as a line of investors demanded their money back, Galleon announced that it would liquidate its funds. In a brief monthly letter, Galleon stressed that its funds "performed well in October, despite having to wind down our portfolios."
[7] NEW YORK -- The Securities and Exchange Commission will likely add additional defendants to its insider-trading lawsuit against Raj Rajaratnam and his hedge-fund firm, Galleon Group, an SEC lawyer said Wednesday.
[8] NEW YORK (Dow Jones)--Prosecutors asked a federal magistrate judge Wednesday not to reduce the $100 million bail for hedge-fund founder Raj Rajaratnam, saying Rajaratnam poses "a serious risk of flight." In a brief filed Wednesday, Assistant U.S. Attorneys Jonathan Streeter and Josh Klein argued, as they have before, that the amount of time Rajaratnam is facing in the insider-trading case, his extensive travel overseas in the past and his substantial assets make him a flight risk. "The evidence against the defendant is strong, thus increasing the prospect of conviction and the attendant likelihood that he will flee," Klein and Streeter.
[9] The Sri Lankan-born Rajaratnam, 52, and the five other defendants are free on bail. In court papers asking a judge to jail Rajaratnam because he may be a flight risk, prosecutors mentioned Roomy Khan, a convicted felon and former Intel employee cited as a cooperating witness in media reports as well as in an Oct. 29 letter to the court by Rajaratnam's lawyers. "This attempt to undermine the government's evidence falls flat," the prosecutor's brief in Manhattan federal court said.
[4] The document does not identify any cooperating witnesses and mentions Khan only by way of response to last week's letter by lawyers for Rajaratnam. In the letter, the Galleon hedge fund founder, free on bond since his initial arrest on Oct. 16 along with five others, asked a judge to reduce his bail to $25 million from $100 million and to ease his travel restrictions.
[3] Usually, when there are parallel criminal and civil charges against defendants, the criminal case takes precedence and the civil case is put on hold. In this civil case, however, Rakoff set trial for August 2, 2010. He simply said "No" to the proposal to put the civil case on hold. Rakoff drew attention earlier this year when he ordered a trial after the SEC and Bank of America Corp reached a settlement over bonuses paid at Merrill Lynch & Co. Rajaratnam's lawyer, John Dowd, told reporters after the hearing that he had been prepared to go to trial on the original date set by the judge -- April 2, 2010.
[1] At a hearing Wednesday, Valerie Szczepanik, a lawyer for the SEC, said there's a "real possibility" that additional defendants will be added to the civil case against Rajaratnam and five other individuals. Ms. Szczepanik said she couldn't comment on the timing of when those additional defendants might be added.
[8] "There is a real possibility that we will be adding additional parties," U.S. Securities and Exchange Commission lawyer Valerie Ann Szczepanik said in a Manhattan court hearing in the civil case.
[4] The date of a civil trial in the U.S. Securities and Exchange Commission's Galleon insider trading case has been set for August 2, in spite of concerns it would interfere with a criminal investigation.
[10] U.S. District Judge Jed Rakoff turned down a joint proposal by the SEC and some of the defense lawyers to put the civil case on hold for 90 days to obtain and review electronic surveillance material obtained in the criminal case.
[1] Federal prosecutors have described the case as the biggest-ever hedge fund insider-trading scandal, involving executives of some well-known U.S. companies, including Intel Corp's venture capital arm, International Business Machines and McKinsey & Co management consultants.
[4] What's shocking is how Rajaratnam is accused of having, over at least 10 years, cultivated a network of insiders feeding him nonpublic information about future earnings announcements from public companies like AMD ( AMD Quote ) (including its former CEO), IBM ( IBM Quote ) Intel ( INTC Quote ) and some of their most prestigious advisers like McKinsey & Co. Why would so many bright, high-ranking people at such successful companies get caught up in such activities? Perhaps they craved access to a man whom Forbes recently ranked as the 262nd richest American, worth $1.8 billion and in the top 40 of hedge fund managers. In a recent PBS "Frontline" episode on Alan Greenspan, the program made the allegation that the former Federal Reserve chief and acolyte of free marketer Ayn Rand had once joked with former head of the CFTC, Brooksley Born, that the two of them would never get along because she believed in prosecuting capital markets crimes and he didn't. He supposedly went on to explain that his strong faith in free markets made him believe that it was unnecessary to go after white-collar criminals through any kind of enforcement program. Greenspan believed that market participants would ferret out ill-gotten gains and punish those people for their crimes by starving them of future capital. Such efficiencies would likely occur before the governmental regulatory body even knew something nefarious was going on.
[5] 
Rajaratnam, 52, a Sri Lankan-born billionaire, and the five other defendants are free on bail. Among those accused of criminal and civil charges are executives of Intel's venture capital arm, International Business Machines and McKinsey & Co management consultants.
[1] A representative for Rajaratnam's lawyer, John Dowd, could not immediately be reached for a comment on the government brief on Wednesday. "If the defendant has no intention of fleeing then it should not matter to him whether the bond is $25 million or $100 million," the government brief said.
[3] "As the complaint itself makes clear, the defendant's assertion that the government's case hinges on a single witness is false," the brief by the office of the U.S. attorney in Manhattan said. "This case involves wiretap evidence of the defendant making incriminating statements that would be strong even absent the testimony of any cooperating witness.
[3] Raj Rajaratnam's Galleon Group said in a letter to investors that it has moved mostly to cash and expects to return their money some time after. [11] Year to date, the funds were all up, from.66 percent for the Asia Macro fund to 33.3 percent for the Asia Long/Short fund. "We have consistently maintained that our portfolios are liquid, and we were pleased to be able to convert the bulk of our investments to cash in an efficient manner without compromising performance," the firm said in its letter. Galleon also reiterated that it has been contacted by "several investment firms" have expressed interest in its investment team.
[6] SOURCES1.
More defendants may be added in Galleon case: SEC | U.S. | Reuters2.
May be more defendants in Galleon case-SEC lawyer | Markets | Markets News | Reuters3.
U.S. cites cooperators in Galleon hedge fund case | Reuters4.
More targets, cooperators in Galleon insider case | Top News | Reuters5.
What Galleon Teaches Us | Financial Advisor Update | Financial Articles & Investing News | TheStreet.com6.
Galleon Moves Its Portfolios to Nearly All Cash - DealBook Blog - NYTimes.com7.
Galleon says firms are inquiring about employees | Deals | Mergers & Acquisitions | Reuters8.
SEC Likely to Add More Defendants to Galleon Case - WSJ.com9.
UPDATE: Prosecutors Oppose Rajaratnam's Bid To Reduce Bail - WSJ.com10.
FT.com / UK - Judge sets date for Galleon civil case11.
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